The property type you choose affects your investment loan before it affects your rental return. For Hobart rentvestors, that means the finance question and the property question need answering together.
Rentvesting means buying an investment property somewhere you can afford while you keep renting the home you want to live in. The trade-off is that you carry rent and a mortgage at the same time, and you do not build equity in the place you live. Property type decides how heavy that load is.
How Does Property Type Affect an Investment Loan?
Each lender sets its own maximum LVR and its own policy for different property types, so the same borrower can get different answers from different lenders.
The loan to value ratio (LVR) is your loan divided by the property's value. Lending above 80 per cent LVR generally needs Lenders Mortgage Insurance (LMI). The lender and the insurer each approve it separately, and the premium is paid by you. The trade-off is a higher upfront cost in return for a smaller deposit. Our page on lenders mortgage insurance for investors covers how that works.
Units and many townhouses come with body corporate or strata fees. Check the fees for the specific property. Those fees reduce your cash flow even though they do not change your loan repayments. If you are weighing a unit against a house, look at investment loans for units and apartments and compare the full holding costs, not just the purchase price.
New Builds and Established Homes: How Negative Gearing Differs
Negative gearing now treats new builds and established homes differently. Losses on eligible new builds can still be deducted against all your income, while losses on established homes bought after 7:30pm AEST on 12 May 2026 are treated differently from the 2027-28 income year.
From the 2027-28 income year, a net rental loss on an established residential property acquired after that time can only be deducted against other residential property income, including residential capital gains. Excess losses can be carried forward. Properties bought between 12 May 2026 and 30 June 2027 can be negatively geared under the current rules until 30 June 2027 only. Properties held at 7:30pm AEST on 12 May 2026, including those under contract awaiting settlement, keep full deductibility against other income until sold.
Eligible new builds include dwellings on previously vacant land, and replacement dwellings where the number of dwellings increases. Knock-down rebuilds that do not add dwellings, and substantial renovations, are not eligible. A new build that is occupied for more than 12 months before it is sold to a later investor loses this treatment for that buyer. That is the trade-off to weigh if you are considering new build rentvesting or a house and land package.
Interest remains deductible on a rented property, but only the interest part of a repayment, not the principal. Read our guide to negative gearing for rentvestors and speak to your accountant about how this applies to your circumstances.
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Book a chat with a Finance & Mortgage Brokers at Rentvesting Mortgage Broker today.
Interest-Only or Principal and Interest: A Repayment Example at 6.75%
An interest-only loan lowers your repayments for a set period, but it does not reduce the debt and it does not increase how much you can borrow. Lenders assess interest-only loans on the principal and interest repayments over the remaining term after the interest-only period ends.
As an example, consider a Hobart rentvestor who is weighing up a townhouse and needs a $500,000 loan. We will use an illustrative rate of 6.75% p.a. for every figure, not a current offer.
- Interest-only: about $2,813 a month.
- Principal and interest over 30 years: about $3,243 a month.
- Interest-only for five years, then principal and interest over the remaining 25 years: about $3,455 a month.
The interest-only option saves roughly $430 a month for five years. After that, the loan is still $500,000 and the repayment is about $212 a month higher than a 30-year principal and interest loan. That is the cost of the lower early payments. If the rent on the townhouse does not cover the costs, a lower repayment can ease cash flow, but only if you plan for the jump. See our page on interest-only investment loans and run your own numbers with the mortgage repayment calculator.
Only the interest portion is deductible under either structure. Ask your accountant how that plays out for you.
How Lenders Count Rental Income for Different Property Types
Most lenders count only part of the rent a property earns. APRA's guidance says prudent policies include a minimum 20 per cent haircut on expected rent, so no more than 80 per cent is counted. That allowance covers periods without a tenant. It does not cover management fees or maintenance.
Lenders generally place more weight on actual rent received than on a rental appraisal. Ask your lender what rental evidence it accepts for a vacant property. Our page on rental income assessment for investment loans explains what lenders look at.
Banks must also assess you at a rate at least 3.0 percentage points above the loan's rate. That buffer applies to new borrowers at banks, credit unions and building societies. Non-bank lenders are not bound by it, though they set their own credit policies. This is one reason we compare lenders across the market before recommending a structure.
Lender policy can also differ for off-the-plan purchases, so check with your lender before signing a contract.
If you are choosing between property types in Hobart or interstate, we can model the loan, the rent and the tax position side by side. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Does an interest-only loan increase how much I can borrow?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term after the interest-only period. That usually gives a lower maximum loan than a standard principal and interest loan.
Is negative gearing still available on new builds?
Losses on eligible new builds acquired after 12 May 2026 can still be deducted against all income. Established homes bought after that time are treated differently from the 2027-28 income year. Speak to your accountant about your situation.
How much rent do lenders count on an investment property?
APRA's guidance expects a minimum 20 per cent haircut, so no more than 80 per cent of expected rent is counted. Individual lenders set their own policies beyond that.
When is Lenders Mortgage Insurance needed on an investment loan?
LMI is generally required when the LVR is above 80 per cent. You pay the premium, and both the lender and the insurer must approve the loan.
